Answered: What amount of the payment made on…

Business

Accounting

What amount of the payment made on January 1, 2022 will be interest expense?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 1EA: Halep Inc. borrowed $30,000 from Davis Bank and signed a 4-year note payable stating the interest...

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Sally Corp. borrowed $360,000 from County Bank on January 1, 2020 signing a 15 year note payable. The loan has an interest rate of 4% and a fixed annual payment of $32,379. Annual payments begin January 1, 2021. What amount of the payment made on January 1, 2022 will be interest expense?

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